Australian Broker Call

Credit Suisse rates AHG as Outperform (1) -

The automotive industry faces challenges, with the company having the added headwind that Western Australia is posting the worst sales declines in the country, an area where it has a higher presence.

Credit Suisse believes momentum will improve in FY18 and, while acknowledging the negative sentiment in the short term, considers the risks are priced on a 12-month view and retains an Outperform rating. Target is reduced to $3.60 from $4.35.

Target price is $3.60 Current Price is $3.03 Difference: $0.57
If AHG meets the Credit Suisse target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $3.71, suggesting upside of 22.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates ALQ as Neutral (3) -

The company expects an immediate reversion in life sciences margins, as problem geographies recover, because of the resolution of internal problems, and delayed projects commence.

As this is the main negative emanating from the FY17 results Credit Suisse believes the market can now focus forward. While potential upside exists, the broker believes some restraint is still justified because of the operating leverage within the business and the poor predictability of revenues in the past.

Neutral retained. Target rises to $6.70 from $5.90.

Target price is $6.70 Current Price is $6.60 Difference: $0.1
If ALQ meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $6.38, suggesting downside of -3.9% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates APE as Neutral (3) -

New car sales in the year to date have been worse than expected and the company's recent trading update has led to negative revisions to FY17 forecasts.

While the stock has declined so too has the earnings base, Credit Suisse observes, and momentum is expected to improve. The broker continues to believe the valuation is fair and maintains a Neutral rating. Target is reduced to $8.00 from $9.90.

Target price is $8.00 Current Price is $7.68 Difference: $0.32
If APE meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $7.84, suggesting upside of 1.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates CTX as Buy (1) -

Citi observes the stock has underperformed since late 2016 because of uncertainty over the earnings loss from the Woolworths ((WOW)) fuels contract. The broker envisages upside to consensus earnings estimates for 2018 from a combination of cost reductions, volume growth and further acquisitions.

This is all ahead of the merits of the convenience store strategy, which could also provide a similar magnitude of upside over the coming few years. Citi retains a Buy rating. Target rises to $36.74 from $36.41.

Target price is $36.74 Current Price is $32.65 Difference: $4.09
If CTX meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $33.96, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates DMP as Overweight (1) -

The company has announced the acquisition of Bain's remaining 25% stake in the Japanese business. Morgan Stanley does not believe consensus estimates currently reflect the accretion in FY18 earnings per share and this should lead to upgrades.

By owning 100% of the Japanese business the broker believes the company is now fully able to drive profit. Around 60% of earnings are generated from offshore and the broker remains attracted to the long-term earnings growth potential.

Price target is $80. Overweight. Sector view is In-Line.

Target price is $80.00 Current Price is $61.55 Difference: $18.45
If DMP meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $67.60, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates DMP as Downgrade to Hold from Add (3) -

Bain Capital has exercised its put option to sell back its 25% stake of Domino's Japan. Morgans estimates the sale will prove 3-4% earnings accretive.

Otherwise the broker has cut its earnings growth forecasts due to lower same-store-sales growth assumptions, higher depreciation and fx impacts. Morgans still sees solid earnings growth over the next 3-5 years but believes the stock to be fairly valued. Downgrade to Hold.

Target falls to $65.62 from $82.38.

Target price is $65.62 Current Price is $61.55 Difference: $4.07
If DMP meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $67.60, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates GUD as Sell (5) -

The company has reached agreement to sell its Dexion business for $7.5m, substantially below Citi's estimates ($29m) and book value (around $45m). The broker suspects a prolonged sales process affected the valuation the company received for this business.

The broker believes the weak sale price means there is less firepower to fund further acquisitions in the automotive space. Sell rating retained. Target is $11.44.

Target price is $11.44 Current Price is $12.31 Difference: minus $0.87 (current price is over target).
If GUD meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.70, suggesting downside of -10.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates HSO as Downgrade to Underperform from Neutral (5) -

Credit Suisse re-bases hospital revenue growth assumptions to allow for the ongoing shift in mix to day surgery from overnight stays. In addition, with industry volume growth rates currently running below longer term averages the broker factors in a delay in the ramp up in the utilisation of capacity.

The changes result in downgrades to earnings estimates of -7%. Rating is downgraded to Underperform from Neutral. Target is reduced to $2.10 from $2.45.

Target price is $2.10 Current Price is $2.07 Difference: $0.03
If HSO meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.57, suggesting upside of 28.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates MQA as Downgrade to Neutral from Outperform (3) -

Macquarie Group's ((MQG)) MEIF2 fund owns around 16% of the French toll road APRR and the fund is winding up. Macquarie Atlas has a pre-emptive right for 9.7ppt of the 16% stake.

Credit Suisse observes the complexity of governance makes it difficult for the fund to get attractive offers from other investors and MQA is therefore likely to get the additional 9.7% at an attractive price.

Credit Suisse raises the target to $5.90 from $5.70 but downgrades to Neutral from Outperform, given the strong performance of the shares.

Target price is $5.90 Current Price is $5.89 Difference: $0.01
If MQA meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $5.58, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates MYR as Neutral (3) -

Austradia, which owns Top Shop/Top Man shops has been placed in voluntary administration and may be restructured by the UK parent,  Arcadia. Myer acquired a 25% stake in Austradia in 2015.

Macquarie suspects that, longer term, the re-positioning of the brand should overcome the potential demise of this chain. In the short term uncertainty of supply - this is an anchor brand in youth apparel - exposes Myer to risk and potential for margin compression should the store go into liquidation.

Neutral retained. Target is $1.05.

Target price is $1.05 Current Price is $0.84 Difference: $0.21
If MYR meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $1.00, suggesting upside of 18.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates PSQ as Overweight (1) -

Morgan Stanley believes the company is on track to over deliver on its targets for rolling out stores in Australia. The broker believes the stock is clearly outperforming peers but has de-rated despite an outlook for 10 years of double-digit growth.

The broker likes exposure to growing healthcare expenditure with low regulatory and doctor risk versus peers.

The Overweight rating and In-Line industry view are maintained and the target is $2.60.

Target price is $2.60 Current Price is $2.00 Difference: $0.6
If PSQ meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates RHC as Downgrade to Neutral from Outperform (3) -

Credit Suisse revises Australian hospital revenue growth rates to allow for a shift in mix to day surgery from overnight stays. While the trend may have been evident for the past 15 years the broker believes it could be exacerbated going forward because of affordability issues with private health insurance.

The broker makes modest downgrades to earnings estimates. Rating is downgraded to Neutral from Outperform. Target drops to $73.00 from $74.50.

Target price is $73.00 Current Price is $70.19 Difference: $2.81
If RHC meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $75.37, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates SHV as Hold (3) -

A further revision of the FY17 crop estimate sees Select Harvests downgrading by -7%. Given a high fixed cost base, the broker has subsequently cut forecast earnings by -24.8%, and reduced its expectations for FY18-19 yields.

The broker continues to believe mid to long term prospects are favourable, assuming a return to more normal seasonal conditions. Hold retained, target falls to $4.75 from $5.60.

Target price is $4.75 Current Price is $4.34 Difference: $0.41
If SHV meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates SHV as Neutral (3) -

The company has suffered a decline in production yields, now forecasting FY17 almond volumes to be 13,500-14,000 tonnes versus around 16,000 tonnes forecast in February and 14,800 tonnes flagged in April.

UBS observes it is unusual for a production downgrade of this magnitude to occur in a biennial positive year. Nevertheless, the broker believes a wet weather affected production and this is purely an agricultural event, not necessarily extrapolated to forecasts beyond FY17.

The broker also notes, after very early optimism regarding Californian crop forecasts, estimates now reveal just 2.8% growth, which should support prices. Neutral rating maintained. Target falls to $4.56 from $5.43.

Target price is $4.56 Current Price is $4.34 Difference: $0.22
If SHV meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates SUN as Underweight (5) -

Morgan Stanley observes the company's new strategy is to build a modular platform and package experiences to help customers achieve outcomes rather than a traditional price-led transaction model. The company is also evaluating strategic's options in the life business.

Morgan Stanley believes there is tangible upside from the strategy but it does require a leap of faith at present and looks forward to further detail at the investor briefing on June 1.

Underweight rating, $12 target and In-Line industry view retained.

Target price is $12.00 Current Price is $14.03 Difference: minus $2.03 (current price is over target).
If SUN meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.73, suggesting downside of -1.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates TCL as Outperform (1) -

The company's traffic and revenue expectations have been provided for the I-395.Traffic wise, Macquarie believes the base case appears conservative with long-term traffic growth at 0.5-1.5% and price growth at CPI +1%.

The broker believes the share price might appear stretched but this is countered by the ability to fund around $7.5bn of capital expenditure without material mounts of new equity and highlights the value creation from optimising the balance sheet.

Outperform retained. Target is raised to $12.90 from $12.40.

Target price is $12.90 Current Price is $12.26 Difference: $0.64
If TCL meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $12.07, suggesting downside of -2.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates WPL as Overweight (1) -

Concerns are rising that OPEC may not extend production cuts next year, Morgan Stanley observes. The broker lowers oil price forecasts, also noting that US shale is growing faster than previously thought and demand is slightly weaker.

The broker forecasts long-term Brent at US$65/bbl versus US$75/bbl previously. Woodside remains the broker's number one stock in order of preference.

Target is reduced to $36.60 from $40.00. Overweight rating and In-Line industry view retained.

Target price is $36.60 Current Price is $32.86 Difference: $3.74
If WPL meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $32.45, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources